How Lenovo is succeeding despite a shrinking market for PCs

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Few markets have proven as grueling for vendors as the Windows PC business. Literally hundreds of companies have built desktops, notebooks, and now tablets based on first DOS and now Windows, but only a few have been able to make a long-term success out of it. When it comes to selling Windows computers in volume to enterprise-scale customers, the business is quickly coming down to three companies — HP, Dell, and Lenovo. I had the opportunity while at CES to sit down for an exclusive interview with Emilio Ghilardi, the new COO of Lenovo North America, to learn from him why Lenovo has been so successful in such a difficult environment, and how it plans to stay that way.

Lenovo’s formula for success

Ghilardi can quickly point to the reasons he sees for Lenovo’s continued success selling to large businesses. First in his mind is its complete line of products — from mobile devices all the way to the data center. He credits Lenovo’s management for having the foresight to acquire both the Motorola phone business from Google and it x86 server business from IBM — in addition to its earlier acquisition of IBM’s popular ThinkPad line of notebook computers. That breadth has allowed Lenovo to call at the CIO level in companies and act as an IT partner — ironically much like IBM itself did for decades in the mainframe era.

In the meantime, HP completely fumbled its TouchPad product line and had to dead end WebOS — taking it largely out of the mobile market for years. While HP is working hard to regain a presence in mobile devices, it’s still way behind. Dell has had a lot more success than HP in mobile, including some recent innovative new products, but so far hasn’t made all the inroads it wants in the data center. No doubt Dell hopes that its recently-announced merger with EMC will give it the breadth and muscle to be a true enterprise partner to its customers, but the companies still needs to execute on that strategy.

Second, Ghilardi credits Lenovo’s vertical integration of manufacturing and design, in addition to sales and marketing. While all of its competitors — with the notable exception of Apple — have been trimming R&D spending to the bone, Lenovo has been able to maintain a high level of investment in innovation. In part this is because of Lenovo’s Chinese roots, which help give it a lower cost structure in both manufacturing and development than its competitors. Most Windows OEMs, Lenovo included, are beholden to the clout and subsidies they receive from Microsoft and Intel. But Lenovo’s technical strength, and low-cost manufacturing, give it more flexibility than its rivals to pursue only the product opportunities it believes will be valuable.

Finally, Ghilardi believes that innovating to address customers’ unmet needs is a key factor in Lenovo’s continued success. This starts with Lenovo’s customer-focused product design process. Focusing on customer needs may seem like common sense, but the hard work of getting customer input, sifting through it, and then actually building products that address their needs isn’t something every tech firm is good at. Lenovo regularly runs focus groups of long-time and new customers in various locations around the world to keep its product road map on track. Ghilardi is the first to own up to the criticism that Lenovo has too many products. He says that might be true, but the company doesn’t always know which will be a success, and he would rather have too many than too few.

Lenovo’s products speak for themselves

As someone who bought my first IBM ThinkPad nearly 30 years ago, I well remember how its rugged build, solid features, and integrated TrackPoint were compelling to me. But early ThinkPads were certainly far from stylish. Since becoming part of Lenovo, the former IBM product line has become a lot more stylish and a lot more versatile. Sure, the trademark “Think” devices are still an only-slightly-sleeker shape than before, and they are still black, but they are chock full of the latest consumer-friendly features — catering to the Choose Your Own Device (CYOD) mantra now followed by many enterprises.

The ThinkPad brand is now also surrounded by mid-range Yoga, and consumer-focused Miix products. These are trendy, colorful, and more than capable of going head-to-head with their competition. Shortcomings in previous product generations (like the 8GB RAM limit for the X1 Carbon that caused me to buy yet another Dell XPS for personal use) are gone. I used a loaner Yoga 900 to do all of my reporting from CES and found it packed an amazing punch into its 2.8 pound, sleek, chassis (our sister publication PCMag.com gave it an Editor’s Choice award).

At the same time, Lenovo’s products retain their corporate-friendly focus. Security features like Trusted Platform Modules (TPM) and Intel’s vPro are built-in to the ThinkPad products. Some are available as options for Lenovo’s consumer versions. Companies with demanding road warriors can customize just about any computing platform they need, with snap-together keyboards, docks, chargers, hard drives, and even pico-projectors now available. The X1 Tablet, for example, integrates many of these expansion modules into its form factor, while for other notebook models they are packaged into in a small-form-factor stacking dock.

Lenovo’s strategy is born of market necessity

Lenovo’s core market of traditional PCs is at best stagnant, and most likely shrinking. Last year’s drop in PC shipments is partially blamed on economic factors, but it is part of a long term slow decline. Lenovo is still the worldwide leader in PC shipments, and it fared better than any other Windows PC maker, but only Apple actually shipped more PCs in 2015 than 2014. Some of those missing sales turned into mobile device sales instead, so a broad product line is quickly becoming a necessity.

Lenovo’s competitors aren’t standing still either. When Michael Dell took the company private three years ago, he did it in part so that it could spend more on innovative products. One of those was the new version of the XPS 13. Targeted at consumers, the model found a surprisingly-warm reception among enterprise customers. Inspired by that success, Dell’s newly-unveiled line of Latitude business laptops incorporates more style and more end-user appeal than previous versions — in a clear attempt to go head-to-head with Lenovo’s new ThinkPad models. HP also seems to be getting on track, with its new Sceptre X2 hybrid getting excellent press as a Surface Pro and Yoga competitor.

Where Lenovo goes from here

Lenovo’s strategy is largely one of common sense that could probably be described with the business school buzzword “fast follower.” By hewing to the stated requirements of its customer base, it can reasonably expect to have products they will wind up buying. As many other companies have learned the hard way, though, the keyword in this strategy is fast. When there is a disruptive or discontinuous innovation in the market — like the introduction of smartphones into the corporate world through the back door of employee adoption as consumers — fast followers need to move quickly and effectively. That’s where Lenovo’s vertical integration, financial strength, and willingness to adapt come into play.

As an example of how this played out in mobile, HP felt it couldn’t make the profit it needed with “me too” devices based on either Android or Windows Phone, so it gambled billions on WebOS in a failed attempt to be a leader. Dell essentially exited the handheld business it helped start with the Axim — only re-entering long after Apple and Samsung were off to the races with smartphones. Lenovo took the practical approach of buying Motorola’s established smartphone business at a fire sale price, and using its worldwide presence and manufacturing clout to turn it into a 80 million unit a year supplier.

Ghilardi and Lenovo see the future as holding plenty more of these transformational challenges — including the home of the future, the office of the future, and of course the ubiquity of computing devices as they become embedded in everything from our appliances to our cars. Key to Lenovo’s future success will be maintaining its speed and adaptability as it grows, and as competitors like Dell and HP refine their own strategies.

Tagged In

I think Lenovo’s success is mainly due to the sturdiness of construction throughout their product line. Specs aside, if you touch a $500 USD Lenovo, Dell and HP – the Lenovo feels like it has the best quality. Sure they all make excellent high-end models but Lenovo maintains its quality feel even at their bottom models. Dell or HP construction quality tends to wane as the price drops. Lenovo’s are the easiest to sell IMO. However, they don’t deserve it because of Superfish; also IMO.

I agree that build quality even on the prosumer Yoga line is excellent. We’ve had a Yoga 2 Pro in the family for a couple years and it has been flawless and looks as good as new. The Yoga 900 I’ve been testing is even more solid. Of course, so are the two Dell XPS 15s I’ve owned, but those are true high-end models.

Paragonx

This is what matters. I have a cheap 300€ Lenovo laptop and the build quality is still immaculate, with the acutype keyboard and everything. Even the heating is managed in a way that it doesn’t affect the battery, the keyboard or any other essential components. I’ve used Asus and HP before, but their products just overheated and fell apart.

Ekard

Do not buy Lenovo. I would not of had an issue with Superfish if it didn’t reinstall itself after wiping the drive. Whomever made that decision at Lenovo should of been fired but it will probably happen again. After all, why should trust and security get in the way of profits.

I pushed company spokespeople on this, and was pretty satisfied with their response. At the time, they did move quickly (once they discovered the issues) to stop shipping it and provide removal instructions (plus the AV subscription offer), and since then have tightened up their vetting process for 3rd party software, which they now claim is substantially better than that of most of their competitors. That isn’t to say they should get a free pass, but personally, that episode wouldn’t cause me to stay away from Lenovo at this point.

Bill

True… This could happen anywhere. There’s bad actors everywhere and all it takes is one power or mony hungry manager to make the mistake of going to business with the wrong 3rd party. That beeing said, that episode with the superfish – until it was discovered and Lenovo did a mea culpa – puts a very bad gloom over how we perceive the intentions of Lenovo. One more strike and they are out.

FWIW, I bought my most recent Windows laptop from a Microsoft store because of exactly this. They put a clean build of the OS on it (without the paid-ware that is on the typical consumer PC). At the time, the pricing was the same as buying it through the more traditional channels. They offer some other services too, but I was mostly just interested in having a system without junk on it.

Bill

Lenovo should offer this as well in light of that stunt they pulled. And then I’ll trust them…
You should be offered the choice:
1. their current build with the free trails, perks, “optimizations” and unfortunately some bloatware and maybe a chance of spy or mallware.
2. never been messed with, no shit, no frill, straight up and down: bare and newest version of Windows OS.

That’d be nice. I know all the PC vendors get paid to put 3rd party software on their boxes (and that helps keep prices down a bit), but I don’t know how much it adds up to.

Ekard

The issue is not the software, the issue is that Lenovo (not a 3rd party) basically setup a root kit, except worse, the software reinstalled itself through Lenovo’s bios mechanism. The fact that Lenovo thought it was okay to do this in the first place is suspect. When I wipe a PC and perform a clean install using Microsoft’s ISOs, I expect no OEM software to be installed on the PC (unless I installed it after the fact).

Again, I could care less about the superfish cert if it had not been able to reinstall itself after a clean install.

Basically, we will have to disagree, I do not think Lenovo is a trustworthy source for hardware.

I have been running Lenovo for years at home and at work. They are rock solid.

Luiz SP

I don’t know how someone can recommend Lenovo. I’m a Tpad and a Yoga user and have nothing else other than problems… Bluetooth mouse can’t keep a connection, Wifi card that does not work. Lenovo customer service is a joke… all they say is that they are investigating and their bios does not even allow you to search for a solution as their hardware is whitelisted inside the bios… After almost an year with a Yoga that didn’t connect to wifi I end up getting someone from Europe to buy me a card from Intel that the model is white listed but bluetooth is a lost case… and I’m not an isolated case…a quick search of Lenovo forums and you will find hundreds of similar cases with no – I said – no solution from Lenovo. I would accept a problem with a new technology but with wifi and bluetooth? spare me, decade old technologies and should work fine nowadays… Lenovo never more !

Kyle

Quoth the raven, “Lenovo, nevermore!”

Jokes aside, what model do you have? I have no love for Lenovo, but your problem sounds like it could be a relatively simple fix.

Matsumoto

what i can dig up from my memory: lenovo = spyware, rootwares, blotwares…

Jose

Could the additional business of China give lenovo a competitive edge?

Kary

Interesting note about HP and mobile. It reminds me of when WordPerfect bet on OS/2 over Windows.

Kyle

Of course, the same handful of ODMs make the laptops for all three major OEMs listed here. Build quality probably boils down to which one made the specific model you’re looking at.

According to that article (nice link by the way), “They decided to increase the company’s in-house manufacturing to 50% from less than 30%.”

To an extent, they appear to do a lot of in-house manufacturing, but it also looks like much of this could be for their desktop systems and smartphone/tablet devices. I can’t find any credible sources to indicate that they develop their laptops in-house, but they may very well be doing at least a portion of them that way.

In 2012, Lenovo moved production of the ThinkPad line back to Japan (where apparently the original design came from – something I hadn’t realized). I believe it manufactures
there in collaboration with NEC. They touted the benefit of higher-quality at the time. My Yoga review unit, in contrast, says Made in China, although I certainly can’t find any fault with its build quality after a week of hauling it around at CES.

systemBuilder

Lenovo products have never been worse during the lifetime of the company. Check out the website – most of the products are rated 2 stars or 3 stars at most by the customers! Gone are the days when everything got 4 or 4.5 stars. They have focused on cost reducing by slashing the quality of the scratchpad and the screens and even tried dumping the trackpoint / ultranav buttons! They no longer offer build-to-order computers – AT ALL !!! Base models are priced reasonably but are VERY spartan. Any minor upgrade (screen, ram, cpu, tiny SSD), add $250 each! Any desirable config is always $1700 !! Amazing they can rip off their customers so badly and stay in business! I give them 5 years before they hang themselves.

Mayank Mittal

Worst Services and Worst quality product by Lenovo:

I already had a warranty of my product and This is first time I am using HDMI port of my Laptop.But it is informed by CSR that it comes under ADP and can’t be repaired. How it is considered as accidental damage as this is first time i am using HDMI port. It shows that you does not want to support customer and provide worst quality product this is not good.

Serial Number (S/N): YB00785920

LAPTOP: Y510P

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